In the last years, I had the chance to devote most of my waking hours to think about a big issue for any business: distribution.
The way a company structures its operations become vital to its long-term ability to create value. In fact, the business model is an essential part of any business.
Often, especially in the start-up world, there is the belief that a great product or service is all you need. However, that is not the case.
In fact, the tech giants listed in this article all mastered distribution. There is no doubt that each of them has excellent products and offer incredible services.
However, without a proper distributionstrategy, their success wouldn’t have been possible.
Company
Revenue Streams
Key Characteristics and Business Strategies
Core Value Proposition
Customer Segments
Distribution Channels
Apple
Hardware Sales, Software Sales, Services, App Store Sales, Licensing
1. Hardware and Software Integration: Apple designs both hardware and software. 2. Ecosystem: Creating a seamless ecosystem of products and services. 3. Premium Pricing: Charging premium prices for quality products.
Delivering high-quality, integrated products and services that provide a user-friendly and seamless experience, appealing to users who value quality and integration.
1. Software Dominance: Microsoft is a leader in software products. 2. Cloud Services: Expanding into cloud computing. 3. Enterprise Solutions: Offering enterprise software and services.
Providing essential software solutions for businesses, cloud services for scalability, and a suite of enterprise solutions, catering to organizations’ productivity and technology needs.
1. Search Engine: Google’s search engine is a core product. 2. Advertising: Generating revenue through advertising. 3. Data Services: Collecting and analyzing user data.
Offering the world’s most popular search engine, enabling businesses to reach their audience through advertising, and utilizing data to provide personalized services and insights to users and advertisers.
Advertising (Facebook Ads), Social Media Marketing, Oculus Sales, Hardware Sales
1. Social Media: Facebook is a leading social media platform. 2. Advertising: Monetizing through targeted advertising. 3. Ecosystem: Expanding into other platforms (Instagram, WhatsApp).
Connecting people worldwide on a social media platform, offering targeted advertising to businesses, and expanding its ecosystem to encompass various communication and sharing services.
E-commerce Sales (Retail and Marketplace), Amazon Web Services (AWS), Prime Membership Subscriptions
1. E-commerce: Amazon is a dominant player in online retail. 2. Amazon Web Services (AWS): Providing cloud infrastructure. 3. Prime Membership: Offering subscription benefits.
Providing a vast online marketplace for consumers, cloud infrastructure services for businesses, and subscription benefits like fast shipping and content access, enhancing convenience and value for customers.
Online shoppers, businesses
Online marketplace, AWS, Prime membership, physical stores.
1. Streaming: Netflix is a leading streaming platform. 2. Original Content: Producing exclusive content. 3. Subscription Model: Charging monthly fees for access.
Delivering a wide range of streaming content, including exclusive original shows and movies, to subscribers through a subscription-based model, offering entertainment and flexibility in viewing.
Streamers, entertainment enthusiasts
Online platform, mobile app, partnerships.
Tesla
Electric Vehicle Sales, Energy Product Sales (Solar and Batteries), Autopilot Features
1. Electric Vehicles (EVs): Tesla designs and manufactures EVs. 2. Autonomous Driving: Investing in autonomous technology. 3. Energy Products: Offering solar and energy storage solutions.
Leading the EV market with innovative electric vehicles, pursuing autonomous driving technology, and providing sustainable energy solutions, targeting environmentally conscious consumers and businesses.
Electric vehicle enthusiasts, eco-conscious buyers
Direct sales, online orders, showrooms, superchargers.
1. Ride-Sharing: Uber offers on-demand ride-sharing services. 2. Food Delivery: Expanding into food delivery. 3. Mobility: Pursuing various mobility solutions.
Providing convenient transportation options through a mobile app, including ride-sharing and food delivery, and exploring new mobility services, addressing the evolving transportation needs of individuals and cities.
Ride-seekers, foodies, urban commuters
Mobile app, partnerships, Uber Eats.
Airbnb
Accommodation Booking Fees, Experience Booking Fees, Airbnb Plus and Lux Rentals, Host Fees
1. Short-Term Rentals: Airbnb connects travelers with unique short-term rental accommodations. 2. Host Services: Tools and support for hosts. 3. Experiences: Offering guided activities.
Enabling travelers to discover unique accommodations and experiences worldwide while providing hosts with a platform to earn income by renting their properties or hosting activities, creating a global hospitality community.
Travelers, hosts, experience seekers
Online platform, mobile app.
Twitter
Advertising (Promoted Tweets, Trends), Data Licensing (Access to Twitter Data), MoPub Mobile Advertising
1. Microblogging: Twitter is a prominent microblogging platform. 2. Advertising: Monetizing through targeted advertising. 3. Real-Time Information: Providing real-time news and updates.
Offering a platform for concise communication and real-time information sharing, while allowing advertisers to reach engaged audiences through promoted content and trends, fostering global conversation.
Social media users, advertisers, businesses
Online platform, mobile app, advertising networks.
Salesforce
Subscription Revenue (CRM), Cloud Services (Salesforce Cloud), Professional Services
1. Customer Relationship Management (CRM): Salesforce offers CRM solutions. 2. Cloud Services: Providing cloud-based applications. 3. Integration: Focusing on integrations with various platforms.
Helping businesses manage customer relationships, streamline operations through cloud-based applications, and integrate with other platforms, enhancing customer engagement and productivity.
1. Professional Networking: LinkedIn is a leading professional networking platform. 2. Recruitment: Offering job postings and recruitment tools. 3. Content: Providing industry-related content.
Facilitating professional connections and networking, aiding in talent recruitment and job seeking, and offering valuable industry insights and content, serving as a platform for career growth and development.
Professionals, job seekers, recruiters
Online platform, mobile app, premium subscriptions.
1. Music Streaming: Spotify is a major music streaming service. 2. Freemium Model: Offering both free and premium subscriptions. 3. Personalized Playlists: Curating personalized music experiences.
Providing access to an extensive music library with both free and premium subscription options, along with personalized playlists and recommendations, offering an enjoyable music streaming experience.
Offering industry-standard creative software, transitioning to a subscription-based model for accessibility, and providing cloud services for collaborative and efficient creative work, catering to professionals and creatives.
Creative professionals, designers, businesses
Licensing, subscriptions, cloud services.
PayPal
Transaction Fees (Online Payments), Payment Processing Fees (Businesses), Interest on Funds in Accounts
1. Online Payments: PayPal enables online and mobile payments. 2. Payment Processing: Offering payment solutions for businesses. 3. Financial Services: Expanding into financial services.
Simplifying online payments for consumers, providing secure payment solutions for businesses, and exploring additional financial services, making digital transactions convenient and accessible to all.
1. Streaming: Netflix is a leading streaming platform. 2. Original Content: Producing exclusive content. 3. Subscription Model: Charging monthly fees for access.
Delivering a wide range of streaming content, including exclusive original shows and movies, to subscribers through a subscription-based model, offering entertainment and flexibility in viewing.
Streamers, entertainment enthusiasts
Online platform, mobile app, partnerships.
Tesla
Electric Vehicle Sales, Energy Product Sales (Solar and Batteries), Autopilot Features
1. Electric Vehicles (EVs): Tesla designs and manufactures EVs. 2. Autonomous Driving: Investing in autonomous technology. 3. Energy Products: Offering solar and energy storage solutions.
Leading the EV market with innovative electric vehicles, pursuing autonomous driving technology, and providing sustainable energy solutions, targeting environmentally conscious consumers and businesses.
Electric vehicle enthusiasts, eco-conscious buyers
Direct sales, online orders, showrooms, superchargers.
1. Ride-Sharing: Uber offers on-demand ride-sharing services. 2. Food Delivery: Expanding into food delivery. 3. Mobility: Pursuing various mobility solutions.
Providing convenient transportation options through a mobile app, including ride-sharing and food delivery, and exploring new mobility services, addressing the evolving transportation needs of individuals and cities.
Ride-seekers, foodies, urban commuters
Mobile app, partnerships, Uber Eats.
Airbnb
Accommodation Booking Fees, Experience Booking Fees, Airbnb Plus and Lux Rentals, Host Fees
1. Short-Term Rentals: Airbnb connects travelers with unique short-term rental accommodations. 2. Host Services: Tools and support for hosts. 3. Experiences: Offering guided activities.
Enabling travelers to discover unique accommodations and experiences worldwide while providing hosts with a platform to earn income by renting their properties or hosting activities, creating a global hospitality community.
Travelers, hosts, experience seekers
Online platform, mobile app.
Twitter
Advertising (Promoted Tweets, Trends), Data Licensing (Access to Twitter Data), MoPub Mobile Advertising
1. Microblogging: Twitter is a prominent microblogging platform. 2. Advertising: Monetizing through targeted advertising. 3. Real-Time Information: Providing real-time news and updates.
Offering a platform for concise communication and real-time information sharing, while allowing advertisers to reach engaged audiences through promoted content and trends, fostering global conversation.
Social media users, advertisers, businesses
Online platform, mobile app, advertising networks.
Apple has a business model that is divided into products and services. Apple generated over $394 billion in revenues in 2022, of which $205.5 came from iPhone sales, $40 billion came from Mac sales, over $41 billion came from accessories and wearables (AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and accessories), $29.3 billion came from iPad sales, and $78.13 billion came from services.
Apple’s business model is based on the sales of products. It is undeniable that the value of those products is based on Apple’s ability to create a friendly environment for its products.
Apple sold over $191 billion worth of iPhones in 2021!
Apple’s sales breakdown
2021
iPhone
$191.97B
Mac
$35.19B
iPad
$31.86B
AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch and accessories
$38.36B
Services (Company’s advertising, AppleCare, cloud, digital content, payment, and other services)
$68.42B
Total
$365.81B
As of 2021, the iPhone still represents over 52% of the total sales.
Apple’s made over $365.8 billion in revenues in 2021, of which over $191.9 billion or over 52% of its total revenues came from the iPhone. Yet, the iPhone isn’t just a hardware product; it’s a businessplatform that combines hardware (iPhone), operating system (iOS), and a marketplace (the App Store). Thus, the company still makes most of its money around a single product which powers up an entrepreneurial ecosystem.
Microsoft has a diversified businessmodel, spanning from Office to gaming (with Xbox), LinkedIn, search (with Bing), and enterprise services (with GitHub). In 2021, Microsoft made over $198 billion in revenues, of which over $67 billion came from Server products and cloud services, and $44.8 billion came from Office products and cloud services. Windows generated $24.7 billion, Gaming generated over $16 billion, LinkedIn over $13 billion, and search advertising (through Bing) over $11.5 billion. Enterprise (GitHub) generated $7.4 billion, and devices (PC) generated almost $7 billion.
Founded in 1975 Microsoft has survived a few tech bubbles and thrived. In fact, as of the time of this writing, Microsoft is still one of the most valued companies, with a market capitalization of over seven hundred billion dollars.
That is also because the company has been able to use the excess cash it generated in the last decades to acquire new ventures.
In fact, when Microsoft sniffs a trend, it goes all in. For instance, in 2016 Microsoft bought LinkedIn to enter the professional network space.
Microsoft is also in the search and advertising industry with Bing. In short, Microsoft has been able to use its cash cow, the Microsoft Office System to diversify its business model.
Today Microsoft is quite diversified and it comprises platforms, like LinkedIn.
2021
Server products and cloud services
$52.59B
Office products and cloud services
$39.87B
Windows
$23.22B
Gaming
$15.37B
Linkedin
$10.29B
Search advertising
$8.5B
Enterprise services
$6.9B
Devices
$6.8B
Other
$4.48B
$168B
In 2021, Microsoft generated over $168 billion in revenues, with server products and cloud services passing for the first time office products.
Amazon has a business model with many moving parts. The e-commerce platform generated $220 billion in 2022, followed by third-party stores services which generated over $117 billion; Amazon AWS, which generated over $80 billion; Amazon advertising which generated almost $38 billion and Amazon Prime, which generated over $35 billion, and physical stores which generated almost $19 billion.
Amazon is one of the most disruptive tech companies. It started as an online bookstore to become the everything store; even though most of its revenues come from its store.
There is a growing part of the business that relies on seller services, subscription services (Prime), and cloud-based services (AWS). Therefore, Amazon too has a diversified business model.
It is highly probable that the part of the business related to seller services, subscriptions, and cloud-based services will be the most critical part of the company also from the revenue generation standpoint.
Amazon Revenue Breakdown
2021
Online stores
$222B
Physical stores
$17B
Third-party seller services
$103.3B
Subscription services
$31.76B
AWS
$62.2B
Advertising
$31.16B
Other
$2.17B
Although the cloud services represent a small part of the business as of now. What started as a “side project” might be the most important business segment in the coming years.
Google is an attention merchant that – in 2022 – generated over $224 billion (almost 80% of revenues) from ads (Google Search, YouTube Ads, and Network sites), followed by Google Play, Pixel phones, YouTube Premium (a $29 billion segment), and Google Cloud ($26.2 billion).
Google’s business model is based mainly on advertising. Even though the company has placed some bets on products that are not related to its main business model.
Even though Google was a latecomer in the search engine industry, it took it over with the algorithm that changed the web: PageRank.
Google Revenue Breakdown
2021
Google Search & other
$148.95B
Google Network Members’
$31.7B
YouTube ads
$28.85B
Google other
$28B
Google Cloud
$19.2B
Other Bets
$0.75B
As of 2021 81% of the revenues come from the advertising networks of Google. In fact, advertising generates over $209 billion dollars in revenues; no doubt that is the cash cow for Google.
It is also true that the company is growing other revenue streams (such as Apps, Google Cloud, and Hardware).
Those sources will grow more and more in the future as Google will rely less on advertising. Google’s business model, and ability to create value for several key players – I argue – is the key ingredient to its success.
Starting as a social experiment, at Harvard University, back in 2004, Facebook quickly expanded to reach over 1 million monthly active users by the end of the same year. By early 2005, Facebook was already present in 800 college networks. By 2012, as Facebook got ready for its IPO, the company reached over a billion monthly active users.
In fact, as of 2021 over 97% of its revenues came from advertising.
Meta Revenue Breakdown
2021
%
Advertising
$114.9 Billion
97.5%
Other revenue (payments and fees)
$721 Million
0.6%
Reality Labs (primarily sales of Oculus, now called Meta Quest)
$2.27 Billion
1.9%
Total
$117.9 Billion
Throughout the 2020s, Facebook went thru a few turmoils. The latest, which posed a threat to its whole business model, was the Apple privacy change policy, which made Facebook advertising machine way less effective.
This forced Facebook to transition into Meta. A rebrand that was completed in 2022.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
